The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) has committed significant time and resources to safeguarding employee contributions by investigating situations in which plan sponsors improperly delay forwarding employee contributions to the plan or simply convert the contributions to other non-plan uses.  In order to enforce the timeliness of contributions, the EBSA is conducting civil and criminal investigations into 401(k) misuse; they are issuing a regulation to shorten the time for transmission of contributions to the plan and they are launching an education campaign to inform retirement plan participants about their rights and ways to protect their pensions.  According to the Department of Labor, in fiscal year

In order to enforce the timeliness of contributions, the EBSA is conducting civil and criminal investigations into 401(k) misuse; they are issuing a regulation to shorten the time for transmission of contributions to the plan and they are launching an education campaign to inform retirement plan participants about their rights and ways to protect their pensions.

According to the Department of Labor, in fiscal year 2015, EBSA investigators had 274 civil cases in which employee contributions were returned to plans. Those cases totaled over $4.9 million in participant contribution recoveries.

The DOL participant contribution regulation requires employers of all sizes to transmit employee contributions to pension plans as soon as they can be segregated, but in no case later than the 15th business day of the month immediately following the month in which the contribution is either withheld or received by the employer. The Department issued an amendment to the participant contribution regulation to create a safe harbor rule under which participant contributions to small plans (with fewer than 100 participants) will be deemed to be made in compliance with the law if those amounts are deposited with small plans within seven business days of withholding or receipt.

In an effort to educate participants, the DOL has published “The Top Ten Warning Signs” that is geared towards providing participants with tips to make them aware of potential 401(k) abuse as well as other publications to educate participants about their retirement benefits.

Finally, the EBSA has adopted the Voluntary Fiduciary Correction Program (VFCP) to encourage employers to comply with the Employee Retirement Income Security Act (ERISA). This program allows plan officials to self-identify and correct certain violations and receive “no action” letters if they meet certain criteria. Most of the VFCP applications involve delinquent or late employee contributions. This successful program allows self-identified violations to be corrected, allowing EBSA investigators to pursue undiscovered violations.

The bottom line is that one of the most important things you can do for your employees in your efforts to help them save for retirement is to ensure that all employee contributions are remitted to the plan in a timely fashion.